Update: Said Rahmani, CEO of Sarava, has given an extensive interview (in Persian) to Shanbe- Startupmag providing further detail on these investments.

In November, a government report detailing the first 100 days of President Rouhani’s second term, announced that Digikala, Iran’s leading e-commerce platform, had received a major new investment.

A section of the report tabulating recent foreign direct investment in Iran notes that an entity called International Internet Investment Coöperatief UA (IIIC) has made an investment of USD 100 million to acquire 21% of Noavaran Fan Avaze, the parent company of Digikala, which was founded by twin brothers Hamid and Saeed Mohammadi. Digikala did not respond to request for comment.

The size of the investment is notable as it values Digikala at USD 500 million, making it by far Iran’s largest digital enterprise, and bringing the company to a new milestone on the path to becoming Iran’s first so-called “unicorn,” a tech company with a USD 1 billion valuation. The valuation is also near the USD 580 million price Amazon paid for Souq, the Arab world’s leading e-commerce platform, earlier this year.

Famously, Digikala was valued at a widely reported figure of USD 150 million in 2014, an early indication of the immense potential for e-commerce in Iran’s large consumer market. The new valuation is consistent with the company’s growth. The company moved EUR 347 million (including VAT) worth of merchandise in the Iranian year 1395, representing a 81% growth in local currency terms over the previous year. Growth in gross merchandise value this year is expected to top 20%. But the timing of the investment is surprising, coming in a period of uncertainty when the pace of foreign investment has generally slowed.

The registered address for IIIC leads back to Private Equity Services, a Dutch company which provides domiciliary and corporate services to a wide range of investment companies. The use of a “Netherlands cooperative” structure is common for holding companies. The UA moniker denotes a cooperative with excluded liability, with at least two members.

IIIC was back in the headlines this week as Café Bazaar announced that the Dutch entity will make a EUR 38 million investment for a 10% stake in the company, which is Iran's leading app store.

The use of the cooperative structure makes it difficult to know the identity of Digikala and Café Bazaar's new shareholders. The new beneficiary shareholders are unlikely to be Dutch, despite Iranian news reports emphasizing the fact. Locating an investment company in the Netherlands is advantageous from a tax perspective because of a “participation exemption” on capital gains.

Corporate records indicate that IIIC has two subsidiary companies. The first is Regent Group Services, a Dutch company founded in 2016, as “a global E-Commerce and health sciences ecosystem platform.” The second is, Pulse & Pixel Group B.V., a Dutch company established in 2016 which shares its name with PPG, one of Iran’s leading digital media companies. According to public records, Farbod Sadeghian, a co-founder of PPG, is the corporate director of the Dutch entity. PPG signed an affiliation agreement with global communications giant WPP in 2016.

Tellingly, PPG, Café Bazaar, and Digikala share a common shareholder in Sarava, which owns 75% of PPG, 20% of Bazaar, and 61% of Digikala (as reported prior to the IIIC investments). A source familiar with the details of the Digikala and Café Bazaar deals confirmed to Bourse & Bazaar that IIIC is an international investment vehicle set up by Sarava itself and that the new investments follow a successful campaign which saw the company raise over USD 100 million in capital from foreign investors.

Despite the discrete nature of the transaction and the further expansion of Sarava's dominance in the ecosystem, for Iran’s digital entrepreneurs, news of the investment should be welcome. Iran’s tech sector is still at an early stage in its development and is therefore vulnerable to any near-term reduction in the pool of available venture capital. That foreign investors remain committed to the market despite persistent uncertainty should give confidence to those working to create Iran's next Digikala or Café Bazaar.